Volume 24, No. 13

What Keeps the SEC Busy - 2016: The American Institute of Certified Public Accountants held its annual “Current SEC & PCAOB Developments Conference” in Washington, DC last week. Speakers came from all of the major accounting agencies or standard-setters: the SEC, the PCAOB, the FASB, and the IASB. The iconic event is also the most ecumenical of holiday parties, this year drawing 1,300 attendees from accounting firms large and small, and corporations large and small, too.

The payback for partying arrives very soon: almost everyone attending the conference will be involved in some way in the production of the annual 10-K filings. The external auditors do their inside audit work, resulting in their eventual approval of what investors see from the outside. Accountants and auditors use the conference to learn of potential accounting pitfalls, in terms of SEC issues. The conference is an early warning system for accountants and auditors alike. Understanding the SEC’s concerns lets them allocate their reporting and auditing efforts where they’re most needed, hopefully allowing them to avoid (or minimize) SEC review comments.

Investors benefit from this conference, too: they become privy to what concerns the SEC based on their ground-level view of what companies are doing in their reporting, whether good or bad. Good investors are paid to be skeptics, but you have to know something before you can be skeptical. The topics covered in this conference promote that skepticism. Technical issues were covered that should be of interest to investors, but the SEC’s continuing emphasis on disclosure effectiveness - along with the FASB’s – are unsettling for investors. As in the last several years, the conference carried a message that standard setters and regulators are more interested in the effects of standards and disclosures on issuers than how they affect investors. “What keeps the SEC busy” over the next twelve months might be less about improving information to investors that it is about making life easier for corporate finance departments.